Bad news for Canada's currency is good news for many
By Solarina Ho and Leah Schnurr
TORONTO/OTTAWA (Reuters) - Canadians' overseas spending power has taken a hit, but the plunge in the Canadian dollar after the central bank cut interest rates on Wednesday to try to revive a sputtering economy is being cheered by a wide array of businesses.
The tourism sector, along with export-oriented manufacturers and resource companies were among those applauding the Canadian dollar's six-year low on Thursday after the Bank of Canada's 25-basis-point rate cut to 0.5 percent, which was triggered largely by last year's collapse in the price of oil, a major Canadian export.
At Abigail's Hotel, a boutique hotel in Victoria, British Columbia, business was already looking good before the rate cut, the second one this year. Now, American visitors, who make up 40 to 50 percent of the clientele, will get more for their money, while more Canadians will visit the Pacific Coast city instead of traveling abroad.
"Business is the strongest it's been in a long, long time. I can echo that that's the sentiment of the industry," said Abigail's general manager, Nick Saklas. "Canadians are lot more reluctant to head south of the border."
The Bank of Canada's efforts to revive an economy that likely shrank in the first half of 2015 have spurred some analysts to predict the Canadian dollar will soften toward 75 U.S. cents in coming months. It traded just above 77 U.S. cents on Thursday.
That's down about 20 percent from a year ago, when it was at 93.10 U.S. cents.
Bank Governor Stephen Poloz is especially keen to see non-energy exports pick up. Some manufacturers say a weaker loonie can only help.
They include Clearpath Robotics, an Ontario company that makes robotic systems. It expects to benefit from export sales priced in U.S. dollars, while it pays most of its costs in local currency. "We improve our margin," said Chief Executive Bryan Webb. Continued...